Column Shows How Little John Stossel Understands

I just don't understand why an otherwise relatively respectable news operation like
ABC News continues to hang so much of its fortunes on someone as reprehensible as John Stossel. He
ceased being an actual newsman years ago, and frankly, his claims of
"libertarian" leanings have always been something of a stretch. A
true (small l) libertarian would never support such a "pro-corporate"
mentality, and his idea of "freedom" is truly warped.

See,
what Stossel actually is, is a (capital L) Libertarian, which is something
completely different. Libertarians like Stossel think everyone should have the
right to do pretty much anything he or she wants, as long as it makes someone
money. That's their guiding principle; if it makes money, it's good for
business. And Libertarians love to use the term "free market," even
though they have no idea what it is, or how it actually works.

But
frankly, I don’t care that he's a Libertarian. I don’t care that anyone's a
Libertarian. What bothers me is that he's held up by an otherwise honorable
news organization as a "reporter." Hell; his biography on the ABC
News refers to him as a "news correspondent." Well must mean he
corresponds with the news, because he sure as hell doesn't report it. Almost
all of his reports consist of a pre-stated opinion in the form of a question,
as if he's wondering if his opinion is valid, and then he sets about trying to
prove his opinion correct.

Sorry,
but that's not journalism, and that is not news reporting.

(By the way, Mark Karlin of Buzzflash informs me that they "honored" Stossel last week, because he's set to MODERATE a series of Right Wing Town Halls on health care reform. Besides the idea of a moderator supposely being, um, "moderate," shouldn't a moderator at least have some understanding of the topic?)

As
is his habit lately, Stossel published this column, which is absolutely replete
with misunderstandings, misinformation and something approaching complete crap
with regard to the concept of free markets and how they relate to the concept
of health insurance. And since cutting the crap is what we do…

I
can't honestly say whether or not Stossel wrote the headline, but it's
completely ironic…

This
column references President Obama's radio interview with Michael Smerconish. If
you'd like to read the transcript, it's right
here…

As
usual, my comments are in red…

====================================================================

Debate Shows How Little Obama Understands

By John Stossel

"Choice,
competition, reducing costs — those are the things that I want to see
accomplished in this health reform bill," President Obama told talk-show
host Michael Smerconish last week.

Choice
and competition would be good. They would indeed reduce costs. If only the
president meant it. Or understood it.

In
a free market, a business that is complacent about costs learns that its prices
are too high when it sees lower-cost competitors winning over its customers.
The market — actually, the consumer — holds businesses accountable and keeps
them honest. No "public option" is needed.

Okay, let's stop there. The above
statement about "free markets" shows so much ignorance about this
problem that it's breathtaking. I don't mean the statement about the
"public option" not being needed. It's entirely possible that it's
not needed, although no one has been able to show me a rational way to do
provide universal care without it. But the 'free market" simply doesn't
work when it comes to health insurance.

Let me say that again, absolutely
clearly, so that even the densest right winger/Stossel can understand:

The "free market" does not apply to health insurance.

Yeah, I know… Stossel will read
this (when I talk about people, I always send them a copy) and then consider me
a lunatic because, after all, insurance companies take money to provide a
service; therefore,it's a market
product, and it's subject to market forces, so the "free market"
would apply.

But he would be absolutely wrong.

See, the way health insurance works
is simple, and has nothing to do with providing a product or service for a cash
payment. They collect a whole boatload of money, and whatever they don't spend
on paying people's health care bills, they get to call "profit."
Therefore, their entire business model is based on making people pay for
something up front, and then doing their best to NOT give it to them. Whoever
gives the least service gets to keep the most money. If you went to a car
dealer and handed him $20,000, and he proceeded to hide from you and try to not
give you the car you paid for, you’d sue him, and rightfully so. But when
health insurance people act in such a way, we praise them and recommend “free
market” reforms to them. Let me assure you; in a totally free market, you’d get
even less health care than you get now.

The problem with the health
insurance industry is that everyone out there, whether they have insurance or
not, is absolutely entitled to health care at some point in their lives. And
there are a lot of people out there who have medical conditions who cannot be
covered by insurance companies because they represent too great a risk, and
they make it far too difficult for health insurance companies to make money.

So, here's the question inthis debate; how do you cover EVERYONE who
needs health insurance (which is everyone; don't kid yourself) without a public
health insurance component? There really is no choice but to force insurance
companies to take everyone, regardless of risk; how is that a component of a “free
market.”

The situation we find ourselves
faced with has little to do with the cost of insurance premiums; it’s all about
the uninsured. A lot of people who would gladly pay the premiums aren't given
the chance to do so, because they've been deemed too great a risk by the
insurance industry. Not one company, mind you, but the entire industry. They're
not just priced out of the market by high premiums, they're completely locked
out of the market.

So, we have people who will need
health care, and wont be able to pay their bill, and we have health care
delivery entities who need payment for their services but aren’t receiving it,
and will have to raise their prices next year to make up for this year's losses.
As their prices increase at 3-4 times the rate of inflation in the rest of the
economy, insurance companies will be under more pressure to drop those people
who might cost them money, and to raise premiums on the healthy people who are
left.

Now, suppose you lift all of those
non-existent "restrictions" that people like Stossel claim are
preventing competition, and you magically increase competition in the current
status quo "market." Then what? The answer would be higher prices,
not lower. The answer would be a higher number of uninsured. Applying “free
market” principles (as if such things actually exist) to the current health
insurance market would actually serve to exacerbate current problems, not solve
them.

If Joe Blow has AIDS or a heart condition, and
the insurance industry has decided it's too risky to cover him, then how,
exactly do these "free market" morons suggest they be covered? The
only way to cut health care costs overall is to pay all of the bills when they
occur, which means coverage for everyone. Please explain how, within a
"free market" context, you can get health insurance companies to give
affordable coverage to people whom they know will cost them a hell of a lot of
money? At the very least, you'll have to force insurance companies to offer
insurance to everyone, regardless of risk.

Now, call me crazy, but that
doesn't sound like a "free market" to me.

So
the hope for reducing medical costs indeed lies in competition and choice.
Today competition is squelched by government regulation and privilege.

But
Obama's so-called reforms would not create real competition and choice. They
would prohibit it.

Competition
is not a bunch of companies offering the same products and services in the same
way. That sterile notion of competition assumes we already know all that there
is to know.

Now, Stossel moves from
misunderstanding to misinformation.

There is absolutely no prohibition
on competition or choice in any of the bills currently before Congress. I would
also argue that there is nothing in the law preventing competition now, except
corporate greed. The largest health insurers have carved up the country into
pieces, because they make more money by doing so. I hear a lot of right wing
commentators claim that preventing health insurers from selling their wares
between states is a problem, but all insurance is run that way, and no other
insurance industry has that same problem.

There is also no dictum in any of
the bills that requires all insurance companies to offer the same coverage, and
the constant repetition of this canard among so many right wingers is supremely
irritating.

What the health care reform legislation
does is create a set of MINIMUM STANDARDS for coverage. This is exactly like
auto insurance, if one would bother to think about it. Every state has a
minimum coverage requirement for car insurance in their state, but nothing
prevents insurance companies from offering more coverage, or by adding
enhancements to their policies to attract clients. Within the last couple of
days, I've seen a gecko, a cute supermarket checker and Dennis Haysbert all
hawking car insurance, so that would seem to indicate that having a minimum
standard for insurance doesn't inhibit competition in any significant way.

But
consumers often don't know what they want until it's offered, and their
preferences and requirements change. Businesses don't know exactly what
consumers want or the most efficient way to produce it until they are in the
thick of the competitive hustle and bustle.

Nobel
laureate F.A. Hayek taught that competition is a "discovery
procedure." In other words, the "data" of supply and demand emergeonly through the market process. We need open-ended competition not
merely to see which rival is better, but to learn things we didn't know before
and aren't likely to learn any other way.

"Competition
is valuable only because, and so far as, its results are unpredictable
and on the whole different from those which anyone has, or could have,
deliberately aimed at," Hayek wrote.

Well-meaning
politicians have created untold misery by assuming they and their experts know
enough already.

The
health care bills are perfect examples. If competition is a discovery process,
the congressional bills would impose the opposite of competition. They would
forbid real choice.

In place of the variety of products that
competition would generate, we would be forced "choose" among
virtually identical insurance plans. Government would define these plans down
to the last detail.

Once again, this guy is is just
plain lying.Either he read the bills
and didn't understand what they contain, or he understood them and is fabricating.
And either one of those possibilities makes him a liar.

There is nothing in any of the
bills that "forces" anyone to do anything. If you don't want to carry
insurance, you don't have to. If you don't want to offer insurance to your
employees, you don't have to. If insurance companies don't want to participate
in the exchange, they don't have to. If you don't want to buy a policy from an
insurance company in the Exchange, you can buy one from another insurance
company, if you choose.

On the other hand, the reform
program created by HR 3200 would give insurance companies the opportunity to
join an exchange, and offer at least three levels of health plans each. That
means every insurance company that is currently operating will be able to offer
their wares on an even level with every other insurance company, plus a public
option, which they will be free to choose or not. The bill also requires
employers who offer the insurance to pay 76% of the premium. Therefore, if a
private insurance company offers a basic plan for $800 per month, and the
public plan is $600 per month, the employee is looking at paying $200 for the
private, and $150 for the public. What’s to prevent the private insurance
company from offering an enhancement that would justify the extra $50 per
month? The answer is, nothing.

That is competition. In fact, it’s competition
as defined by Stossel himself above. Plus it spreads risk evenly throughout the
entire health insurance "market," and includes subsidies to private
insurance to cover their increased risk, as well. That will create a
competitive situation, where none exists currently.

Every one would have at least the same
"basic" coverage, including physical exams, maternity benefits,
well-baby care, alcoholism treatment and mental-health services. Consumers
could not buy a cheap, high-deductible catastrophic policy. Every insurance
company would have to use an identical government-designed pricing structure.
Prices would be the same for sick and healthy.

In this respect, it wouldn't matter whether
or not Congress created a "public option," a government insurance
plan. In either case, bureaucrats would dictate virtually every aspect of the
health-insurance business.

Again, a lie. Pure sophistry, and I
suspect Stossel knows it.

First of all, prices charged by
private insurance are NOT set by the government in any of the health insurance
reform bills. And except for minimum standards, the government isn’t “dictating”
a damn thing.

It’s also patently false that
consumers can’t buy a cheap, high-deductible catastrophic policy. There is no
prohibition on that whatsoever. But the fact of the matter is, a large number
of the bozos who think they’re indestructible and buy such policies end up not
being able to pay the deductible, and the rest of us end up having to pay their
medical bills. So, the government discourages this practice. If you choose to
opt out of the insurance exchange, and pay for a cheap-o policy that doesn’t
cover anything short of cancer or being hit by a truck, you will also pay a
small tax, to cover the costs should you be hospitalized due to something
lesser, but still too expensive for you to pay for.

This is the cognitive dissonance
that is common among people like Stossel. They see health insurance as a pure
consumer product, and you should only have to buy what you think you need.
Unfortunately, if you’re making decent money, and you choose to opt for “catastrophic
care” because you’re too cheap to pay for full coverage, and two of your kids
develop meningitis, and end up costing $10,000 each to treat, when your
deductible is $50,000, there is a really strong possibility that you’ll never
pay that $20,000 bill. That’s reality, folks. If some numbnuts making $50,000 a
year “chooses” to pay for a “catastrophic” policy to save money, and then ends
up incurring a $20,000 bill, how’s he going to pay for that? And guess who will
end up paying that bill in the end.

Health care is not a consumer
commodity. You can’t shop for it, and you can’t schedule a day to get sick or
injured. When you have a heart attack, you don’t have an opportunity to look
through the Yellow Pages and shop for the best price. You get shoved into an
ambulance and you go to the nearest emergency room. And when you make a “choice”
as Stossel suggest you should be able to make, and opt for “catastrophic”
insurance, or no insurance at all, the rest of us have to pay for your “choice.”
Therefore, health insurance reform includes several provisions to preserve your
choice to be an idiot, while making sure the bills are paid. You just don’t get
to make those choices for free.

What
Obama says in favor of a public option — as of today, at least — tells us how
little he understands competition. The public option's virtue, he told
Smerconish, is that "there wouldn't be a profit motive involved." But
as St. Lawrence University economist Steven Horwitz writes in The Freeman
magazine, profit is not just a motive. Profit (along with loss) is what enables
competition to perform its discovery role:

"Suppose
for a moment that we try to take the profit motive out of health care by going
to a system in which government pays for and/or directly provides the services.
… (P)ublic-spirited politicians and bureaucrats have replaced profit-seeking
firms.

"By
what method exactly will the officials know how to allocate resources? By what
method will they know how much of what kind of health care people want? And
more important, by what method will they know how to produce that health care
without wasting resources? … In markets with good institutions,
profit-seeking producers can get answers to these questions by observing prices
and their own profits and losses in order to determine which uses of resources
are more or less valuable to consumers. … (P)rofits and prices signal the
efficiency (or lack thereof) of resource use and allow producers to learn from
those signals."

NO ONE is talking about taking the
profit motive completely out of health insurance. Yet. But the above is
absolutely absurd, because it's talking about taking the profit motive out of
HEALTH CARE. None of the bills currently before Congress even deals with that.
Not even a little. These bills are about health INSURANCE. And the government
isn’t REPLACING anything. For God’s sake, folks; 47 million people don’t have
health insurance right now, largely because the insurance companies won’t sell
it to them. The government will merely be picking up the slack the insurance
industry itself has already created. If private insurance didn’t want the
government stepping in, they should have figured out a way to offer insurance
to everyone. They didn’t, and the rest of us are paying for it.

Once more; health insurance
companies don't actually produce a product, any more than the check cashing
store down the street produces the money they use to cash your check. At best,
they are performing a service of sorts, but even that’s debatable, based on
their record. Private insurance companies act as an agent, and nothing more. We
pay them to pay our bills for us. If we were talking about them scraping 10%
off our premiums every month, and trying to find ways to squeeze more out of
that 10% every year, we wouldn't be having this debate right now. That’s a
profit everyone can live with, especially if they were covering everyone.

But the model that has developed in
the health insurance industry is one in which they only cover the healthy, they
collect as much money as possible from them, and then do everything possible to
NOT pay for health care, in order to maximize “profit.” Within ten years,
premiums will double and the number of uninsured could hit 75-80 million. That
is not a sustainable model, and it must be changed. And it is simply NOT
POSSIBLE to fix this with anything resembling a "free market"
approach.

Profit is the key to competition.
Anyone who claims to favor competition but looks down at profit has no idea
what he is talking about.

And in true Stossel tradition, he
ends with a straw man.

No one is against profit. There is
nothing in the bills currently before Congress that would prevent anyone from
making a profit. But premiums have doubled in the last ten years, and profits
have increased fourfold, even as record numbers of people are left out of the
system. We're paying more and getting less every year, for a
"product" that every single one of us WILL NEED at some point.

I would also remind Stossel that
the concept of for-profit health insurance is alive and well in most countries
with a public health insurance component. France, Germany, Australia, and
Canada, to name but a few, have a very strong private insurance industry. If
Stossel is correct, how would that be possible?

Whenever you see, hear or read
anything with John Stossel's name on it, you owe it to yourself to do a sniff
test.

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